Economics 201

On the website of The Nation, Bangkok’s second English language paper, there is a tab where a reader can forward an article as an email attachment, or post it on twitter or Facebook. I have been writing a column on business strategy for The Nation for almost 10 years now, and I am fascinated to see which of my columns get the biggest response. Invariably, it is the ones I least expect. I will write something I think is fairly provocative and it gets no “pass alongs”, yet I write something I find a bit prosaic and it gets posted over one hundred times.

I find the same with my Stickman posts; a submission like, for example “Are Stickman Readers Losers?” got almost no replies,
but my recent sub “Economics 101” got many email responses within hours of posting. Over the last few days I have
engaged many of Stick’s readers in healthy intellectual conversation all the way from the causes of exchange rate fluctuations to what companies to invest in.

While I thought the sub would be seen as boring, it seemed to appeal to many of the sites readers.

One reader was so taken by the sub that he penned a response “Reply to the Professor's Economics 101” in which he
claimed to disagree with everything I wrote, saying frankly that it was all “bullshit”.

I always accept fair criticism and wrote the author a response, which I sent to him privately with a cc: to Stickman. Stick suggested that I post my response as a sub, which I do below. I have no interest in responding point by point to the statements made in “Reply to the Professor”, and I have no interest in embarrassing in any way its author, who I find to be an intelligent person.

Anyway, here is my response to him.

Dear Zaq1,

Many thanks for both reading my sub “Economics 101” as well as your thoughtful response to it.

Interestingly, while you say you disagree with everything in it, and that much of it is “bullshit” I actually believe you agree with me.

Let me explain.

Many of Stickman’s readers are men whose only interactions in Thailand are with the bar scene, and so they tend to believe that everything in the bar scene is reflective of life in Thailand as a whole. These people see the cost of bar fines and a night with a lady going up, the price of beer going up, the purchasing power of their home currency going down, and a loss in the Girlfriend experience, among other things. Rather than accepting that there is a major change happening in the bar scene only, something that Stickman has often commented upon, these people see in the decline of the bar scene the decline of Thailand as a whole.

They think because the bar scene is declining that all of Thailand will do the same.

My sub was written for these people, and had two major premises:

1- The Thai economy is booming

2- The Thai economy is not dependent on sex tourism

My first premise I supported by discussing the growth in the stock market, the strength of the baht, and a number of statistics to show that GDP was growing.

Your comments did not refute this. You say that the Dow Jones and S&P 500 are growing also, but that doesn’t refute the fact that the SET is at a 15 year high. The South Korean KOSPI is down 3% in the last 52 weeks, Taiwan is down 2%…just because the DJIA is up doesn’t mean that every country index will go up.

You seem also to feel that GDP statistics are not accurate, but don’t say why. All statistics have some problems in data calculation, but GDP numbers tend to be widely accepted by most economists, despite their sometimes imperfections. The fact is that every economic indicator in Thailand is up…export growth is up 9%, the manufacturing index, overseas sales…

Most tellingly, you say in your summary “…the major reason for Thailand's current boom, which I believe is sustainable for several years yet…” which indicates that you agree with the first premise that the Thai economy is booming.

You say the boom is due to credit expansion, and you may be right. But there should be no doubt that there is a boom.

My second premise, that Thailand is not dependent on sex tourism, I attempt to support in three ways.

First by showing the diversification of the economy, and that tourism as a whole is only 4th among all sectors, accounting for only 9% of GDP. You make comments that the automotive industry is protected and created by foreigners, and that financial service are strong because of foreign investment, but that does not deny the basic premise…that the Thai economy is diversified and not dependent on tourism.

Next I point out that tourism is growing. The tourist arrival numbers clearly show this as do the queues in Immigration (which do not include Thais who go to a different queue). Tourism Authority of Thailand shows 22m tourists (not Thais) last year, up 16%, and projects 24.5m tourists next year.

Lastly, sex tourists appear to be a very small portion of the total amount of tourists. The fact that mainland Chinese do not spend as much on F&B and hotels as westerners (which is true but does not account for the fact that Mainlanders tend to spend more on purchases, souvenirs etc) is irrelevant to the point that total non sex tourism is growing.

So despite your comments, I see nothing in your arguments that refute my points that the Thai economy is both diversified as well as growing.

Thanks again for writing.

Take care

Professor

Zaq1 responded within an hour or so with a courteous reply, basically asking what school of Economic thinking I subscribe to (in case anyone is interested I studied under Milton Friedman at the University of Chicago so I follow the “free market” school, not that it makes much difference.)

Zaq1 is certainly correct in many of the things that he wrote, for example, Thailand’s growth is indeed somewhat based on easy credit, an expansion of the money supply if you want to get technical.

They used to tell a joke at University; something about if you want to know the time you ask three economists and average the results, the point being that you can never get three economists to agree on anything.

The basic point is that I am not trying to explain why the Thai economy is growing, simply to show that it is, and that there is no reason to believe the growth will stop short term. (John Maynard Keynes said “In the long run, we are all dead”. Another economist joke.)

Moving on, in subsequent emails (“Zaq1” and I have exchanged about a dozen in the last 24 hours) he seems to make the point that although the Thai economy is booming, this comes at the expense of people. He says that poverty is growing, and there are now “millions of losers”. And while he also thinks there is huge potential and opportunity in Thailand, he also feels that “booms, inflation and then bust is the inevitable result”.

Now many of you may find these sources disreputable, but the following come from The United Nations, World Bank, and other global organizations.

“Thailand is a middle-income country that has seen remarkable progress in human development in the last twenty years. It will achieve most if not all of the global Millennium Development Goals well in advance of 2015. Thailand has reduced poverty from 27% in 1990 to 9.8% in 2002, and the proportion of underweight children has fallen by nearly half. Most children are in school; universal primary school enrolment is likely to be achieved within a few years. Malaria is no longer a problem in most of the country. Annual new HIV infections have been reduced by more than 80% since 1991, the peak of the epidemic. Strides are being made toward gender equality. “

“Concerning the social and development indicators, Thailand is recognized by the World Bank as “one of the great development success stories”. It is now an upper-middle income country. Within 22 years, the percentage of the population living below the national poverty line decreased dramatically from 42.2 in 1988 to 7.8 in 2010. As of the fourth quarter of the year 2012 (Q4/ 2012), its unemployment rate is 0.5 percent,making Thailand the country with the third lowest unemployment rate in the world – only after Monaco and Qatar.[16]

“Life expectancy in Thailand has gone from 55 in 1960 to 75 in 2011”.

So I submit that over the recent past, while there have been many changes in Thailand, perhaps not all for the best, the resulting economic boom has had many positive influences on the country.

I guess I had better stop here. Thanks to all of you who wrote to me, and thanks to Zaq1, for showing that even a bunch of drink addled sex tourists can stop for a moment and engage in a healthy debate on serious issues.

Take care,

Professor

Stickman's thoughts:

I think this submission highlights some of the difficulties experienced when people (particularly those who don't know each other) debate issues online. Nuances, tone and other subtle indicators can be lost and when you factor in different perspectives, beliefs, agendas and what not it can get difficult. It's one reason why I am reluctant to get in to debates online – I often find that you end up going around in circles or things get unnecessarily heated when in person that would be very unlikely to happen.